The stereotypical college life often consists of parties, horrifically early classes and swimming pools worth of energy drinks to finish assignments. A college student attends a university for their future, yet all of these stereotypes dwell in the present. Thinking of the future is scary, but necessary. While a steady career may feel years away, it is closer than most students realize and an excellent way to prepare is by investing.
The stock market has been plummeting since Covid-19 began. While it has seen inflated rises since, it has continued to drop. Dan Kill, NMU adjunct instructor, shares ways students can learn more about the stock market without risking their money.
“It is very easy to open an online brokerage account with very little or no fees. I would suggest however, for a student to open a “paper trading” account for a time. This will allow them to get used to the mechanics of researching investments and then tracking a “paper” trade where there is no money involved. Just the use of your own spreadsheet program to track daily and weekly price fluctuations and you learn by watching, researching, and tracking the daily price fluctuations and your associated gains or losses,” Kill said.
For students who still wish to invest, there has been a surge in investment apps like Robinhood, which simplify the investing process. These apps can be dangerous, however. It is easy to invest more than one may want, and the information provided within the app is not always worth following.
“They are all useful to a point if you are just looking at a basic buy and hold strategy. They are also very inexpensive and give you tools to help you research your investments. I have read about some apps like Robinhood exposing you to particular trading strategies that even the average investor isn’t familiar with, and this could lead to greatly increased risk,” Kill said in an email.
The stock market may seem fun, but Carol Johnson, Dean and Instructor, accounting
faculty chair, urges students to save.
“A large percentage of the general population has no savings and regularly uses credit for regular monthly expenditures. This is a terrible plan, the debt and cost of the debt will hurt most people. We have to practice good financial health practices just like we exercise, eat healthy foods and engage in healthy activities,” Johnson said in an email. “students should, and must have some type of savings … if possible savings and an emergency fund. What happens if you get sick, your car breaks down and you have unexpected expenses?”
As students, spare income is virtually non-existent, but it is still worth investing in small amounts, according to Johnson. There are also more ways to invest than the stock market, including a 401K and Roth-individual retirement account.
“Any person who earns income can contribute to a Roth-IRA, this can be an awesome retirement account. The benefits are that taxes are paid on the contributions upfront, the investment grows over time and when a person draws from the account it should be tax free income. When I teach financial literacy, I preach having diversity in your retirement portfolio. I call it the retirement pie. We want to craft our portfolio to consider the income tax implications as well. It can be complicated. I would encourage students to accept positions upon graduation that have some type of a retirement plan or 401K plan. Take advantage of any employer contribution — this is like free money. That is always a positive,” Johnson said in an email.
Kill offers similar advice and emphasizes that Roth IRAs and traditional IRAs are typically offered through financial institutions.
Contact your human resource professional or ask the question during an interview for a position for information,” Kill said. “You must have earned income for that specific tax year to contribute, along with other restrictions in terms of the amount you’re allowed to contribute. A great resource is www.irs.gov (yes I have it saved as a favorite).”
Jacob Moore, Senior, accounting major, chose to purchase Walmart stock through payroll and urges students to just get into the market. Investing is scary at first, but once you buy in and learn more about it, it is not so scary, according to Moore.
Moore also encourages students to join the student managed investment fund known as the Superior Fund where upperclassmen of the business program are able to invest a starting amount of $200,000. The amount was set in 2006 and students are responsible for investing and buying stocks and bonds, according to the NMU college of business programs listing. For more information on the Superior fund contact advisor Trent Batchelor at [email protected]